(The Center Square) – The $93.2 billion fiscal year 2021 budget Florida lawmakers adopted last month set aside $300 million in emergency coronavirus funding, boosting state reserves to $3.9 billion.
Of the $12 billion Florida was allocated from the $2.2 trillion federal coronavirus relief package approved by Congress late last month, about $4.6 billion is for budget stabilization.
With approximately $8.5 billion in its coffers, many lawmakers were confident Florida had enough financial resiliency to weather the COVID-19 pandemic without resorting to dramatic budget cuts.
That may turn out to be wishful thinking.
Moody’s Analytics is warning Florida’s stash may not be adequate, estimating the state could fall $8 billion to $10 billion short in funding its budget.
Senate President Bill Galvano told senators in early April a special session likely would be called to focus on dispersing federal funding from aid packages, not necessarily to make significant spending cuts.
The state expects “significant decreases in general revenue collections,” Galvano said but added, “our current general revenue reserve cash balance, combined with other available state reserves, should alleviate any concerns regarding the need to cut the current year budget.”
However, Florida Chief Financial Officer Jimmy Patronis, whose office monitors state day-to-day spending, has been raising alarms that the state could run out of money and lawmakers should return to Tallahassee sooner rather than later to ensure that doesn’t happen.
“[Tuesday’s] Moody’s report makes it clear that as more folks lose their jobs, there will be greater demand for public services like Medicaid,” Patronis said. “The report also points out that the government is going to have to move faster than normal to get families back on their feet.”
Patronis has been lobbying the Legislative Office of Economic & Demographic Research (EDR) to update revenue forecasts. EDR coordinator Amy Baker has resisted doing so because economists don’t have enough data to make projections.
“At this point,” Baker said last week, “what we do know is far outweighed by the assumptions we would need to make.”
Moody’s report, an update to its 2019 State Stress Test Report published in October before coronavirus emerged, is among the first forecasts from financial analysts assessing the pandemic’s effects on state economies.
Moody’s acknowledges the update has vagaries. It does not incorporate the $1.2 billion in additional Medicaid funding Florida will receive after the federal match rate increased by 6.2 percent.
Moody’s pre-pandemic state stress test report estimated how states would handle “moderate” and “severe” recessions within the coming year.
A “moderate recession” in Florida would foster a $4 billion revenue shortfall and a 3.1 percent increase in Medicaid spending for a $5 billion total impact, the report stated, adding reserves would decline by 10.5 percent.
A “severe recession” would produce a $5.6 billion revenue shortfall and 3.5 percent increase in Medicaid spending, a near $7 billion hit, with state reserves drained 15.7 percent, Moody’s projected.
The update also calculated two COVID-19 scenarios with “moderate stress” causing a “combined fiscal shock” of $8.1 billion for Florida.
Under “severe stress,” Moody’s analyzed how the state would fare if travel and business restrictions remained in place through the first two quarters of 2020. That affect would be a “combined fiscal shock” of at least $10 billion, according to the update.
Patronis wants EDR to analyze Moody’s analysis until it has enough of its own data to analyze.
“The states that make the quickest financial recoveries make the smartest use of their reserve funds, and they are also the fastest to act,” he said.